Measuring Sustainability for Small and Medium Businesses: Is a Single, National Standard Possible?

By Vale Jokisch at BALLE conference 2010

Product certifications are everywhere.  Walk into Whole Foods and you’ll see packages labeled Fair Trade Certified, USDA Organic, Rainforest Alliance Certified – the list goes on and on.  It can be challenging for consumers to understand exactly what these certifications mean for the products they choose to buy.

The same could be said about sustainable business practices.  Across the US, local and national organizations are creating standards and certifications for small to mid-sized sustainable businesses.  But what do these certifications actually mean?  And how is a certified sustainable construction company in California measured against a neighborhood restaurant in New York that sources all its ingredients locally?

For Philadelphia-based B Lab, the answer is to create a single, national standard.  To that end, B Lab has created a sustainability certification and rating system for what it calls “benefit corporations” – companies that use the power of business to solve social and environmental problems.  B Lab’s end goal, as described by Hardik Savalia during a panel for the 2010 Annual BALLE Business Conference, is to drive capital towards sustainable businesses.  To help propel that movement, B Lab is working to create policy change that makes the “B Corporation” a formal legal entity (such legislation has already passed in Maryland and Vermont, and is expected to pass in several other states soon) and that creates tax and other incentives for B corporations.

The B Impact Rating System measures performance in five major impact areas: leadership, employees, community, consumers, and environment.  To be certified, businesses must score at least 80 out of a possible 200 points and change their corporate by-laws to incorporate social and environmental bottom lines alongside their financial ones.  Because the certification is intended to be national and to apply to a wide range of businesses, questions on the B Survey are necessarily general in nature.

For some local communities, however, national standards like those set forth by B Lab are too general for their specific needs.  Take, for example, the Andersonville Economic Development Corporation (AEDC) in Chicago.  AEDC’s eco-Andersonville program works with small businesses in this Chicago neighborhood to lessen their environmental impact while deepening their economic impact.  Andersonville’s small businesses, many of whom were working on making their businesses more sustainable, wanted a certification program.  According to Managing Director Sara Dinges, AEDC found that existing certification programs were too expensive and weren’t the right “fit” for their community’s businesses, most of which have between 1-10 employees.  AEDC decided to create its own certification which rates businesses with 1, 2 or 3-stars and is based on the general principles of people, planet and prosperity.  Because they work with a small group of businesses, AEDC is able to track very detailed information on their businesses, down to the dollar amounts businesses spent in their local community.

Genevieve King, Director of the Sustainable Business Council in Missoula, MT, agrees.  Her organization also created its own certification and training program in order to combat “greenwashing.”  SBC focused its certification on 9 “eco-areas” that it felt were most relevant to the 200 or so businesses with which it works.   These included topics like facilities, employees, management, and transportation.

So is there a single solution?  Genevieve agrees that if you put her certification alongside that of B Lab and Andersonville, you would likely find many similarities.  All three organizations emphasize some of the same basic principles: that sustainability certification should be accessible, affordable, and should create value for the businesses.  In addition, all three organizations’ certifications emphasize the value of building and supporting local economies.  A relatively new field but fast growing field, it remains to be seen whether sustainability certification practices will lead to multiple, localized programs or a single, national standard.

Vale is a first year MBA student at Duke University’s Fuqua School of Business and is interested in how  for-profit businesses are finding innovative ways to create social and environmental value.  Her specific  interests are around community economic development, local economies, and impact investing.  Prior  to enrolling at Fuqua she was the Deputy Director at Empowerment Group, a non-profit  micro-  enterprise development organization based in Philadelphia.  Vale has a BA in Economics and Political  Science from Swarthmore College.

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